Could your home loan send you on a world trip?

How would you like to be rewarded with a flight to Los Angeles simply for paying off your home loan? Well, now you can. Qantas Credit Union and Macquarie Bank both offer home loans that give you Qantas Frequent Flyer points each month you pay off your home loan.

But how do these home loans compare on rates and how many frequent flyer points will you really get?

We’ve used the market’s average variable home loan rate of 5.20% for our comparison and compared it with the Qantas Credit Union Home Loan (Package) of 5.14% and the Macquarie Basic Flyer Home Loan (LVR <70%) of 4.84% for a $500,000 loan amount.

Qantas Points are accrued differently for each frequent flyer home loan. With Qantas Credit Union you earn 150 points for every $1,000 on your loan balance per annum. With the Macquarie loan you get 10,000 points for every $100,000 drawn down at settlement and 1,000 points per month as long as the outstanding loan balance is at least $150,000. Plus you get 25,000 points on the 3rd and 5th anniversary of the loan.

How do frequent flyer home loans compare against the average rate home loan?

Mozo’s Rate Chasers have crunched the numbers and tallied up the points and if you’ve got an average rate home loan, it might be a good time to pack those suitcases.

Here’s a look at how they stack up on repayments:

Qantas Credit Union Home Loan (Package) Macquarie Basic Flyer Home Loan (LVR <70%) Average rate home loan in the market
Variable Rate 5.14% 4.84% 5.20%
Upfront fees $0 $0 $0
Ongoing fees $0 $0 $0
Monthly repayments $2,964 $2,891 $2,982

Over 5 years the Qantas Credit Union Home Loan (Package) will save you $1,080 in interest and you’ll accumulate 354,188 Qantas Frequent Flyer points.

By comparison, the Macquarie Basic Flyer Home Loan will save you an incredible $5,460 in interest, enough spending money for shopping up a storm on Rodeo Drive and you’ll earn 160,000 Qantas Frequent Flyer points.

A return flight from Sydney to Los Angeles requires 96,000 Qantas Points and $850.97 in taxes.

How do they compare against the market’s best rate home loan?

While punching in the numbers showed frequent flyer home loans offer great value compared to the average rate home loan in the market, we decided to see how they rate against the best rate home loan in the market, loans.com.au’s Dream Home Loan Variable that currently sits at 4.54%.

Over 5 years, the Dream Home Loan will be $10,380 cheaper than the Qantas Credit Union Home Loan and $6,000 cheaper than the Macquarie Basic Home Loan.

Savings vs points value

Let’s look at how each option stacks up once you take into account the value of the Qantas Frequent Flyer Points over 5 years.

Qantas Credit Union Home Loan (Package) Macquarie Basic Flyer Home Loan (LVR <70%) loans.com.au Dream Home Loan Variable
Qantas Points earned 354,188 160,000 NA
Total points value* $2,785 $1,258 NA
Total cost of loan over 5 years less points value $175,055 $172,202 $167,460

* Based on equating points required for redeeming return SYD-LAX award flight to cost of return SYD-LAX flight excluding taxes. Cost of Qantas return SYD-LAX flight for travel on 1 to 21 November 2014 is $1605.84 (Qantas.com at 27 August 2014)

The verdict

If you’re looking for a home loan that can jet-set you across the world and make saving for your holiday a no-brainer, a frequent flyer home loan could be for you.

As demonstrated if you’re on an average home loan rate with an interest rate over 5.14%, switching to a frequent flyer home loan will be cheaper and you’ll also get a top reward for paying down your home loan.

In our scenario you will be better off by choosing the cheapest rate home loan than opting for a frequent flyer option but an important question to ask yourself is: “Will I actually save that extra money?” The great thing about Frequent Flyer home loans is you’re forced to save those juicy Frequent Flyer points and can reward yourself after five years with an awesome trip to the city of dreams.

Could your home loan send you on a world trip? was last modified: August 27, 2014 by Mozo

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